§ Dr. David Owen (Plymouth, Devon-port)
I beg to move,That an humble Address be presented to Her Majesty, praying that the Petroleum (Production) (Amendment) Regulations 1980 (S.I., 1980. No. 721), dated 21 May 1980, a copy of which was laid before this House on 23 May, be annulled.I make clear that my purpose in moving this prayer is not that we should vote against the regulations but that on this crucial decision the House should have an opportunity of discussing the policy for the North Sea. It also gives us an oppor- 1443 tunity to raise serious criticisms of some aspects of the Government's oil policy. I do not wish to delay in any way the procedure on seventh round licensing. I favour the need for the seventh round, and I consider that its size is about right.
There are arguments as to the exact number of blocks. I believe that the Minister has been correct in not moving towards auctioning of licences. However, there is the question whether we can gain access to substantially greater revenue by the auctioning of licences. That is a tempting question. The Minister's choice of having 20 blocks, in areas where there is a good likelihood of finding oil, where people should be expected to pay a £5 million premium, is a sensible step forward. If we learn from this experiment, it may be possible to go further. I think that it would be possible to have a higher initial fee than the £5 million fee that is proposed.
But the crucial thing that the Minister is right to protect is the need to have a discretionary element, held by the Secretary of State, giving some form of leverage over oil companies so that they will follow the practices and the policies of Her Majesty's Government. If we were to abandon that discretionary element entirely, we would have no leverage, for example, over oil companies in the sense that they should wherever possible purchase their supplies from United Kingdom suppliers.
I attach immense importance to retaining a very high percentage of work in the North Sea that is based in the United Kingdom. In areas of this country with very high unemployment—I know that the Minister, coming from a Scottish constituency, will understand this—it is necessary that this prosperous industry should show in its choice of firms, and in settling the sites at which it places some of its contract work, some understanding of the need for the less prosperous parts of the country to benefit, and in particular the people of Scotland.
I would not, therefore, be prepared to support a move towards an auctioning system, although I am prepared to move forward flexibly in the light of the experience of the seventh round.
I strongly object to what I believe to be a purely doctrinal decision taken by 1444 the Government that the British National Oil Corporation and the British Gas Corporation will no longer have a mandatory majority equity interest in future licences. There is not a shred of justification for it. I believe that it is motivated purely and simply by an animus against BNOC which has been a hallmark of the Prime Minister's policy ever since she took office. It is absolutely disgraceful that here we are debating in July the North Sea and the seventh round, when the cloud of uncertainty which has hung over BNOC ever since the election result which brought the present Government to office, has not been lifted.
I do not adopt a doctrinaire view on these issues. I fundamentally believe that the energy policy of this country is far too important for it to be a shuttlecock between differing Governments. (HON. MEMBERS: "Hear, hear."] Hon. Gentlemen say "Hear, hear", but what is sauce for the goose is sauce for the gander, and there is a responsibility on them as well as on my hon. Friends to ensure that degree of stability.
I say to the Minister—he knows my view of this—that if the control mechanism of BNOC is changed by taking an equity share in BNOC, we shall view it with the utmost seriousness. In the Committee stage of such legislation he will have to fight for it line by line. He will have to justify what I believe will be a very serious challenge to our position on the United Kingdom continental shelf if any change is made in BNOC. It is right to warn Conservative Members that it will raise very serious legal questions on the United Kingdom continental shelf which we shall expose in this House day by day. It will also raise very serious questions about the participation agreements which have been entered into by oil companies on the understanding that it was an arrangement between the Department of Energy, the BNOC and the individual oil company.
It is my personal view that, if we change any aspects of the BNOC relationship, we shall lay ourselves open to the risk that the participation agreements will be reopened. It is a well-known fact that many of the principal oil companies have not accepted, even to this day, the 51 per cent. participation agreement.
§ Dr. Owen
The hon. Gentleman has made the case for us. He says "And quite right, too." He wants to see the participation agreements unravelled, but his right hon. Friends do not want to see them unravelled. It is the cardinal point of their principle, having looked at BNOC and having looked at the 51 per cent. participation agreement—and, in my view, very strongly advised by the Secretary of State for Foreign and Commonwealth Affairs—that they have said that they do not wish to change the participation agreements, and that the arguments for national control over North Sea oil are very strong.
I believe that these arguments will also ring bells among Conservative Members. I do not believe that only on the Opposition Benches are we alarmed by the idea of in any way relaxing our control. Therefore, very wisely, the Minister and the Secretary of State have made clear that they do not wish to affect the trading arrangements or the 51 per cent. participation agreements. But I must warn them —and I speak not on the basis of my extremely limited legal knowledge, but from having consulted people who were deeply involved in the legal situation when those negotiations were first put forward—that it will put those arrangements in potential jeopardy if we introduce public equity into the BNOC. It is right that it should be made clear to the Government, before they take any step that they may later regret, that we shall not feel bound by the normal conventions. If they make that change, it will be resisted.
Furthermore, such a change will have a serious effect on the whole question of trying to have some degree of bipartisanship on energy and North Sea oil policy. It will be inevitable that if the BNOC is to be changed, if the partnership arrangements between the private and the public sectors is to be overthrown my right hon. and hon. Friends, will immediately demand full State involvement in the North Sea.
I am prepared to stand at this Dispatch Box and defend the existing arrangements. I believe that they were the right arrangements honourably negotiated in 1974. I know that there was pressure from the oil companies—they did not like it—but it was a sensible 1446 compromise between the national and the private interest. It was a genuine partnership—it needed to be a partnership—of international oil expertise and money and preserved what I believe is a fair and honest balance.
I object to some of the changes that have been made to date in BNOC, but I would not claim that they are outside the bounds of reasonable bipartisanship. The Minister will obviously not follow the same policy as the Labour Government on North Sea oil. If the Minister wishes to make those changes, we shall resist them. But there is all the difference between those changes and those others which have been broadly accepted by the oil industry. In my view, there is no demand from the oil industry for the dismantling of BNOC. I believe that the industry thinks that it is a doctrinaire policy that has no support and will unlock the issue of a large State ownership.
We are dealing with an important question relating to BNOC and the seventh round. The Government have an opportunity in the seventh round to show that they will not discriminate against BNOC. They have made the decision that it will not be given preferential treatment. I think that it is an unwise decision, but it is open to them to make it.
We now know that the BNOC has formed important partnerships, as have many others, to bid for blocks in the seventh round. When those blocks are announced, I hope that it will be evident to every fair-minded person that BNOC has had a reasonable share of the allocation. If that is done, that will be one of the first steps to restoring confidence and an agreement across the parties on how we should best exploit this most precious asset. Furthermore, if the Government decide not to drop any changes in the BNOC and give it the go-ahead, that, too, will be a welcome sign.
A third and most important sign is that BNOC should not be under any restriction to operate in the market, if it wishes to do so, to purchase any North Sea oil interests from companies which might wish to sell them. If it has the finance and is ready to purchase an interest in the North Sea, if any company wishes to sell such an interest, it 1447 should be free to do so. I should welcome an assurance that there is no financial limitation on BNOC's freedom to buy into interests in the North Sea.
§ Dr. Owen
No. These three issues are of fundamental importance.
I turn now to some of the more detailed points that arise. First, how much money does the Minister think will come from the 20 blocks? Is it £5 million per block? There was a great fanfare of publicity that £100 million would accrue to the Exchequer, but we find in another place an answer given by the Minister of State, Treasury, Lord Cockfield, which indicates that the disregards that can be claimed on the —5 million are extremely extensive.
I am worried because the large oil companies stand to gain the most. One of the main reasons for the seventh round was to encourage some of the smaller oil companies. I am told that if the premium can be offset against United Kingdom tax—there is a large bias in favour of the major companies that are already producing in the North Sea—the most extreme offsets against PRT and corporation tax could reduce the effective premium to only £750,000. If that is so we shall have about £15 million from the £100 million.
This is an important issue that the House should consider carefully. I hope that Conservative Members will urge the Minister to reassess it. The sum of £5 million is a facade. It means that oil companies will pay less than £1 million for those special favours. I thought that £5 million was pitched too low. We may now find that we are getting only about £15 million from those special favours. I wonder whether the Treasury understood that when it agreed to this system. We should seriously consider the disregards and the way in which they favour the large oil companies.
At present, the industry tends to avoid paying the full range of tax by turnkey contracts. The Minister should consider that carefully. The use of turnkey finan- 1448 cial packages for oilfield development has led to substantial revenues. The Government were right to make two increases in PRT since they took office. That barely deserves to come from the Conservative Party's mouth when one considers what it used to say about PRT. The oil industry is discovering that there is little difference in the taxation policies of the two parties. I welcome that. However, there is no point in increasing the tax if substantial loopholes are allowed. Those loopholes are usually exploited by very large oil companies.
Some assurances are needed about the £5 million premium, the ability to get away with paying as little as £750,000, and turnkey packages. I hope that the Minister will give us more figures when he replies.
I have long believed that one cannot have an exploration policy without a depletion policy. I welcome increased exploration. The sooner we know what is in the North Sea, the better. The size of the round is broadly right. However, I am extremely worried that the Government have not produced a depletion policy. The House has the most recent Brown Book before it. I do not know whether it is here by accident or design. Perhaps the Minister has made special arrangements. If so, we are grateful to him. It shows very important changes. It is estimated that United Kingdom oil production will be reduced by 13 per cent. this year. According to the Government's estimates, output by the United Kingdom could reach 80 million to 85 million tonnes, although last year 85 million to 105 million tonnes were forecast. On the whole, I welcome that. It is well known that I believe in a tough depletion policy of net self-sufficiency. We should export only the amount of oil needed to cover the cost of the imported heavy oil that we need in our refineries.
We should reach self-sufficiency this year. On the Government's forward estimates, the United Kingdom's oilfields should yield oil at their peak rate in 1983–84. Output would then be pegged at about 95 million tonnes. That should be the Government's depletion policy.
I think that the Secretary of State is right to enter negotiations with the oil industry. I have always supported that. I am not in favour of a rigid arrangement. I believe that we must have a 1449 flexible and adaptable policy, and that is best done through negotiation with the industry. A firm statement is needed, and the sort of firm statement that is necessary is a declaration that the Government wish to have no more than a certain amount—95 million tonnes would be sufficient. That would also allow them to meet the extra commitments which they will have to the EEC by 1985.
I should not like to see the upper limits reached. The Brown Book shows that production could go up to 130 to 135 million tonnes a year by 1983–84.
§ Dr. Owen
It does not surprise me that the hon. Member should take the interests of individual oil companies. That is characteristic of most of his interventions.
The global contribution is made up of each of the individual companies, and it is true that there will be some people who, for technical reasons, will find that in slowing their production down they may end up with less oil out of the reservoir. Reservoir management is an extremely serious issue. But it works both ways, and the oil companies are pastmasters at giving technical arguments against a depletion policy. We always hear about technical difficulties and why it is impossible to moderate the amount of oil taken out of the reservoirs. But there are some extremely important technical factors coming to our notice that argue the other way.
The sands in the North Sea contain a considerable variation of ordered permeability variance, which is, I believe, the technical term. In those areas where there are permeability variances there is serious risk of bypassing potentially recoverable oil, and therefore reduce recovery rate. There are cases where this permeability variance exists and there is a great deal to be said for the oil companies extracting their oil at a slower rate than might be demanded by their finance people. This is the problem.
There are two aspects here. On the one hand, there is the short-term financial 1450 need, or a supply need, and, on the other, there is the question of reservoir management. I do not believe that that decision can be left simply to the individual oil companies. There is a genuine national interest which must be married up, and that will be difficult to do. It would be far easier if the Secretary of State made it clear that he did not expect the industry to go above a 95 million tonnes production profile over the next five years; that he wished to see the peak production flattened out; that he would take action under the powers that he already has to stop production peaking at 130 to 135 million tonnes; and that he would much prefer not to have to take legislative action in the House but to see a genuine agreement between the industry and the Government. Many people in the industry think that it would be a reasonable offer from the Government, and, in view of the slow-down in production, which has come as a result of many natural forces—the weather, and technical and other aspects—they would welcome it. This is an extremely important issue—how to exploit the North Sea, how to make the best use of this natural asset—which is of major concern to us.
One of my primary concerns is one that is affecting industry very deeply. All the signs are that the £ sterling is becoming a petro-currency. All the signs are that we are running a hopelessly unrealistic exchange rate, which is having a devastating effect on some of our industries whose export markets are being very severely affected.
With high inflation, poor productivity and all the difficulties that we face, this country cannot afford to go through the 1980s with an unrealistic exchange rate. An unrealistic exchange rate devastated Dutch industry. Ever since the Dutch discovered North Sea gas, it has been a serious problem that their Government have had to face. We went through most of the 1960s with an unrealistic exchange rate, and we paid a heavy price in industrial performance, which we are paying even today. Somehow the Government must find a way to manage the exchange rate or shield industry from its effect so that North Sea oil turns out to be the blessing and not the curse of British industry. If we continue with the present high exchange rate, we may look back on this period and wonder whether North 1451 Sea oil contributed to the serious devastation of our industrial base.
§ The Minister of State, Department of Energy (Mr. Hamish Gray)
I am grateful to the right hon. Member for Plymouth, Devonport (Dr. Owen) for the manner in which he delivered his speech. I am glad to note that he welcomes the size of the round that we have decided on and the retention of the discretionary system. I could not disagree with the points that the right hon. Gentleman made. He also welcomes the introduction of a system of premiums. That is encouraging, and we are grateful for the right hon. Gentleman's support.
This is a short debate, and I propose to answer some of the general points that the right hon. Gentleman raised and quickly to outline the regulations. If time permits at the end of the debate, I shall try to deal with points that other hon. Members may raise.
The right hon. Gentleman made the point against our proposals that BNOC and BGC were not being given the same privileges as before. That is correct. I shall deal with that later. After all, BNOC and BGC are perfectly capable of looking after their own interests in the North Sea. The removal of certain privileges from BNOC was welcomed by the corporation at the time. It is our intention that BNOC should be able to act like any other oil company. It is therefore essential that it should be seen by other oil companies as a fair competitor and not subject to privileges.
The right hon. Gentleman mentioned partnerships in which BNOC might engage. He hoped that we would not inhibit BNOC from being involved in farm-ins. That matter is entirely for the corporattion. It has to observe the limitations imposed on other public sector organisations, but each case is treated solely on its merits. There have already been cases in which BNOC has become involved in farm-in proposals, and that will continue. We have no intention of restricting the corporation in that way. It must be left to the commercial judgment of BNOC.
The right hon. Gentleman mentioned disregards. It is true that premium is tax allowable. However, the allowance will take some considerable time to work 1452 through. The benefit of money now BNOC would not have its trading arrange-fit in discounted terms will depend on the individual circumstances of the successful companies.
I shall not deal at length with the question of depletion. The right hon. Gentleman will appreciate why. My right hon. Friend the Secretary of State will make a statement on depletion in the next few weeks, and I do not wish to pre-empt anything that he might say.
It has been useful for the House to have the views of the right hon. Member for Devonport on the future of the BNOC. He rightly said that there were many matters about which we did not greatly disagree. The whole concept of the BNOC is accepted by the Government and there has never been any question of the corporation's trading arm being interfered with. That has been made clear by my right hon. Friend the Secretary of State in the House on a number of occasions.
The Government's proposals for the upstream section of the BNOC will be announced in due course.
§ Mr. Tam Dalyell (West Lothian)
What is the advice of the Department's lawyers in relation to the possible alteration of BNOC, to bring in an element, so some of us understand, of retrospection? Are the Government's proposals in keeping with the advice of the Law Officers and the other legal advisers of the Department?
§ Mr. Gray
We are supposed to be discussing the seventh round and the arrangements for licensing. We are confident that the response to the seventh round will be very good, that it will confirm that confidence is returning to the North Sea—that will show in the number of applications that we receive—and that it will show that the industry has been encouraged by the steps that the Government have already taken.
The industry will have recognised our intention to see that more exploration is encouraged, with the aim of licensing about 90 blocks. The round will be larger than the fifth and sixth rounds combined. The industry will also have been encouraged by the new concept of allowing companies to identify within an area of the northern North Sea the blocks that they would like to apply for—a concept which widens the scope for the nation to harness the companies' ideas to our mutual advantage.
That return of confidence will have been achieved whilst maintaining arrangements which safeguard the national interest. The Government will, through BNOC, obtain access to 51 per cent. of any petroleum found in the areas licensed under the round. Here we may be looking to the future perhaps 10 years hence. No one can forecast with accuracy what the situation will be at that time. We are ensuring that we have maximum flexibility on what action we then decide to take over new oil supplies from the seventh round.
Licence controls will be maintained over important matters such as exploration, development and production, and over the flaring of gas. Full account will be taken, when we examine applications, of the companies' previous performance and future plans. We will look carefully at their past and planned contribution to the United Kingdom economy. We will expect them to have given and continue to give United Kingdom firms full and fair opportunity to compete for offshore orders. We will examine how thoroughly companies have explored their existing licensed acreage.
We will continue to encourage the involvement of the smaller companies in 1454 the firm belief that they have an important contribution to make to our offshore ventures.
We will obtain early and substantial revenue from the higher payments introduced for certain areas. That revenue will be obtained without reducing the support we can give through the licensing arrangements to our wider offshore policies. I am convinced that the national interest will be served by the return of the industry's confidence to tackle the difficult and challenging tasks that lie ahead.
The amendment regulations that we are discussing are part and parcel of the approach on which we have settled. They bring into effect two main changes. They remove from regulation 6 the provision whereby the British National Oil Corporation and the British Gas Corporation, and only those corporations, could apply for offshore production licences without prior notice or invitation from the Secretary of State. BNOC and BGC are now put on an equal footing with all other companies. Any company will be able to apply for an offshore production licence outside rounds of licensing if, but only if, it has previously received notice from the Secretary of State that he is prepared to consider such an application.
Exceptional circumstances may arise where licensing outside this normal process of rounds would be desirable, where, for example, we are satisfied that the issue of a separate replacement licence covering an oilfield is necessary to facilitate the financing of such a field or where the development of a field may be held up because it extends into unlicensed—
§ Mr. Douglas
On a point of order, Mr. Deputy Speaker. In a short debate, is it not appalling that the Minister should resort to reading what is tantamount to a press release?
§ Mr. Deputy Speaker (Mr. Richard Crawshaw)
It is not for the Chair to decide what the Minister reads or does not read. He is entitled to make his case.
§ Mr. Gray
If the hon. Gentleman does not wish to listen, the alternative is in his own hands.
The compulsory surrender arrangements set out in the model clauses for licences have been revised so that the licensee, at the end of six years, is able to retain 50 per cent. of the territory licensed to him. Special rules will apply for particularly small blocks. In the fifth and sixth rounds, licensees were required to surrender two-thirds of their territory after seven years. We think that as the number of small blocks increases this rule could become a disincentive to applications. The change is designed to remove that disincentive. At the same time, by shortening the period when surrenders must take place, we have provided an encouragement for licensees to get on more quickly with their exploration.
These are the principles on which the award of licences will be made. Since the regulations are about the terms of licences, it was important that those should be spelt out to the House. I commend the regulations to the House.
§ Mr. J. Grimond (Orkney and Shetland)
This is a short debate and I do not intend to go into the question of the BNOC, although it is a matter that should at some time be discussed in the House, except to say two things. I do not personally object to the removal of the discrimination in favour of BNOC. On the other hand, the Minister might make clear that the rumours in the press that there was some dissension in BNOC over the appointment of the new chairman were unfounded. Although we may not always agree with what BNOC does, it is important that it should not be pilloried for internal dissensions and other problems that are mythological.
The Minister has spoken about the purpose of the regulations. It is, I understand, to give the Government some right to look again at the North Sea position up to 10 years ahead. There are some points upon which he did not touch. One was the question of auctions. I am not wholeheartedly in favour of auctions, but there is a case to be made for them, with suitable safeguards. The matter was raised by the right hon. Member for Plymouth, Devonport (Dr. Owen). It is right to ask the Government why they have come 1456 down against auctions. The Minister spoke vaguely of what might be in the Government's mind but he was far from specific. It is important to the nation and my constituency to have the best possible Government estimate of production, especially in view of the strange announcement that it will fall.
The reserves of the North Sea are small compared with reserves in the Middle East and Africa. The impression given is that we have large reserves of oil and gas, at least for the next 10 to 30 years. Is that still the Government's view? The Government are not prepared tonight to outline their depletion policy, but we are entitled to know in general whether they will enforce a more strict depletion policy or whether a less strict policy will be allowed. It is important to have more definite estimates about how the Government see the immediate future.
The Minister mentioned the flaring of gas. That is an important matter. After all these years it should be possible for the Government to give more information about whether flaring of gas is to continue as it is or whether some use is to be made of an increasing quantity of gas which is flared.
Is the leverage to be used by the Government in relation to depletion policies and so forth, or do the Government intend to insist that contracts in connection with oil are placed in Britain? The Government should make clear how the regulations differ from their predecessors. The Government should explain how they will change the position of companies which are applying for licences. I am not clear about what the Government mean when they talk of giving licences between the normal rounds. I can see that that might be necessary. I understand from what the Minister said that that will be exceptional. Do the Government intend to break down the system of rounds and to grant licences when they believe it to be suitable? I hope that we shall have a longer debate, especially if there is an important announcement by the Secretary of State in the near future.
§ 11.4 pm
§ Mr. T. H. H. Skeet (Bedford)
I shall make only one point because we do not have much time for this debate. The Government must be careful not to 1457 overregulate the North Sea. A total of 17 Acts apply to the North Sea. The important Acts are the 1934 Act, the Continental Shelf Act 1964, the Petroleum and Submarine Pipe-Lines Act 1975, the Oil Taxation Acts and the Energy Act 1976. They are enough to confuse anybody. In addition, 59 statutory instruments govern the North Sea.
We stand to overregulate the interest. It is not surprising that the right hon. Member for Plymouth, Devonport (Dr. Owen) does not know that depletion already operates. Paragraphs 15 and 16 of the schedule 5 licences cover phased consents and the Government can alter the conditions.
I make my plea to the Government. They have the model clauses for production licences under schedule 5 and 41 separate clauses. Would it not be a good idea for the Government to rely more and more in future on codes of good practice?
May I ask my hon. Friend for one or two details on the changes to be made to paragraph 11, which deals with royalties? What is the total of royalties paid into the national oil account? What amount of royalty oil is paid in kind, and if the royalty is deliverable to the Government, why is BNOC always used to dispose of it?
Would it not be better for the United Kingdom, where oil companies are short of oil—it may be that some of the smaller companies are concerned here—for the Government to dispense with some of the royalty oil to those companies? That would affect their marketing interests.
§ 11.6 pm
§ Mr. John Prescott (Kingston upon Hull, East)
Statutory instrument No. 721 is designed to improve statutory instrument No. 1129. However, it fails to take into account recent reports which indicate the need to improve regulations 24 and 25 of the original instrument. Those dealt with the powers of the Minister to issue directions about safety and training.
I have heard a great deal about contracts, how much oil will be obtained from our North Sea interests and how much money will be made. I am bound to say that, representing a union that represents divers, I am much more concerned about safety and the number of 1458 deaths and accidents that happen as we obtain this valuable resource from the sea bed.
It is interesting to note that in the Brown Book called "Development of Oil and Gas in the United Kingdom" issued by the Department of Energy today we are reminded not only of the value of oil but the cost in human life, accidents and misery involved in its production. The figures show a general increase in deaths, accidents and serious injury in the offshire industry. That evident trend is pointed out in a Financial Times health and safety report in April which compared the various industries in the country.
For example, one notes that those industries covered by Health and Safety Executive legislation have reduced the number of accidents since 1974 when the Health and Safety at Work etc. Act 1974 became applicable to them. Yet those industries that are controlled by Departments such as the North Sea oil industry, the energy industry and the maritime industry, have all witnessed an increase in the number of deaths and accidents—an opposite trend to that in those industries where the health and safety legislation operates.
In the offshore mineral exploration industry between 1974 and 1978 the number of accidents increased threefold. That is totally unacceptable. Those of us who fought for the Departments of Trade and Energy to be relieved of the responsibility for safety and for that responsibility to be transferred to the Health and Safety Executive feel that we were proved absolutely right to argue that case. Our case has been justified by the deplorable increase in the number of deaths and accidents.
On the basis of that argument, if one looks at the agriculture industry, which we managed to have brought within the scope of the Health and Safety Executive despite the opposition of the Ministry of Agriculture, Fisheries and Food, we see that the accident figures in the industry have decreased. I make that point because my experience in the shipping industry and the Department of Trade shows that Departments tend to rely more on codes and recommendations and less on statutorily enforceable standards. There is too often a cosy relationship between the industries concerned 1459 and the civil servants in the Departments. That tends to be reflected in the figures of deaths and accidents.
I hope that the Minister will, perhaps by way of a statutory instrument in future or by using the powers of direction that he has under the original statutory instrument, pay particular attention to the diving industry. I spent a great deal of time in the early 1970s campaigning for diving safety controls and took many delegations to see the hon. Member for Honiton (Mr. Emery), who was then the Minister in the Department of Energy responsible for some of the safety regulations. I put on record that the hon. Gentleman recognised that diving was a dangerous occupation and that a number of provisions that we secured were due to his active intervention.
The essential skills of a diver are correlated to the amount of training that he receives. While the accident figures have fallen to a certain extent from the high level of 1974, they show that diving is still the most dangerous occupation in the country. Training is the key to overcoming that. The Brown Book shows that the North Sea exploration industry spent in 1979 £2,600 million on exploration, development and exploitation. It spent only £4 million on safety training for fire, helicopters and survival. It spent nothing on diving training.
The Fort William diving school is the only such facility involving Government money. It was established in 1974. I was one of those who campaigned actively for it. I pressed that there should be a diving training school at which all divers should be given the minimum necessary training to work in an industry that was working in ever deeper waters. Unfortunately, the industry refused to pay for any such facility. It left the State to meet the charge alone.
One of the matters that concerns me about that school and the training was that contracts were offered to the private sector to manage a Government facility that was to be financed completely with public money. I had deep reservations about offering such contracts to the private sector. The hon. Member for Honiton will know, since I informed him earlier this evening that I intended to raise this matter, that when the Labour Government were in power and he was 1460 in opposition and the matter arose for decision he mentioned to me the possibility of my joining his company to conduct some of this training. My answer to him at the time was quite clear. I said that no Member of Parliament should get involved in any commercial transactions since I believed that they would compromise his position.
I have now read the report of the Public Accounts Committee which was published last week, and that view is shown to have been only too accurate. It confirmed what I learnt in 1974, that the contract was given to a company called the Shenley Trust. The hon. Member for Honiton is a director and former chairman of that trust. I protested to my right hon. Friend the Member for Doncaster (Mr. Walker) at that time, when he was a Minister in the Department of Employment, saying that I thought that it was wrong that a contract should be offered to a company that included a Member of Parliament who had been a Minister in the Department of Energy. I mentioned that to the hon. Member for Honiton.
The matter was dealt with in the twelfth report of the Public Accounts Committee which was published yesterday. It investigated the management of the underwater centre. It concluded that a most unsatisfactory contract had been given in the period 1974 to 1979 to the Shenley Trust. It said that loans from the Government were outstanding and that the cost to the public purse was £1.16 million. It concluded:We also consider that the contractual arrangements for running the Centre had unsatisfactory features.It said:This contract allowed Shenley a margin of 70 per cent. over their attributable costs. This appears to us to be an extremely high rate of profit.I note that the hon. Member for Honiton disputes that fact and is at issue with the Public Accounts Committee about it.
A further matter of concern in the report is that it drew the conclusion from the evidence given by the Civil Service that the decision was taken by the Minister. I do not believe that that tells the whole truth about the decision. That is a matter of real concern to Parliament.
I draw to the attention of the Minister the view expressed by the Civil Service in 1461 its evidence to the Public Accounts Committee indicating that the Departments of Energy and Employment and the Health and Safety Executive no longer considered it necessary to have statutorily enforced training standards. That is unacceptable and deplorable. This training facility is vital to this dangerous occupation, but the industry refuses to pay for it, devoting instead only one-sixth of 1 per cent. of its total expenditure to safety.
It is unsatisfactory to my union and to me that an essential public asset should have been managed in this way. The least that is required is for the Public Accounts Committee to look again at some of the remarks that have been made by individuals. It is even more essential that the House should debate the issue and that the Minister should look seriously at the matter.
§ Mr. Harold Walker (Doncaster)
The decision to which my hon. Friend is referring, and the matter in the Public Accounts Committee report, was a decision entirely for the Manpower Services Commission and not for the Minister at the time, who was me.
§ Mr. Prescott
I thank my right hon. Friend for that intervention and record my appreciation for all that he did for safety in diving. The report points out that the Committee questioned civil servants on their evidence about whether the Minister made the decision. The Committee was not satisfied with their reply, and asked them to give evidence to justify that it was the Minister's decision. The only evidence that they furnished was a parliamentary question that I tabled in 1974. I tabled that question after discussions with my right hon. Friend, when it was made absolutely clear that he was not aware that the contract had been awarded in that way. But I was aware of it, and I informed him about it that day and then tabled the parliamentary question. This was totally unsatisfactory evidence by civil servants to a Committee of the House on an important matter—
§ Mr. Deputy Speaker
Order. The hon. Gentleman has made his point. We do not want to go into the full details. I hope that we shall not pursue the point in any greater depth.
§ Mr. William Hamilton (Fife, Central)
Is my hon. Friend the Member for 1462 Kingston upon Hull, East (Mr. Prescott) aware that this matter is still before the Public Accounts Committee because the Treasury minutes in reply to the report have still to be laid? If he or anybody else in the house is dissatisfied with the accuracy of the report, I advise them to write to the Chairman of the Committee, who will put their submissions before the Committee so that it can ascertain the true facts.
§ Mr. Prescott
I have imposed upon the time of the House, but this is a matter of considerable concern to those whom I represent. It is a vital matter of safety. We are concerned that the number of deaths of divers is increasing, and we intend to do all that we can to ensure that that stops.
§ Mr. Peter Emery (Honiton)
I thank the hon. Member for Kingston-upon-Hull, East (Mr. Prescott) for giving me notice at 6.30 pm today that he intended to raise a certain matter in the debate and to mention my name. I declare an interest in diving, but not in any other matter concerning the regulations before us. Strangely enough, I agree with the hon. Gentleman that it is essential that regulations on diving safety and diving training should be introduced by the Government. As the right hon. Member for Doncaster (Mr. Walker) knows, I have been pressing for the introduction of such regulations since 1974.
The hon. Gentleman raised certain matters which appear in the Public Accounts Committee's Report No. 12. I wish to make make three specific points. On Wednesday of last week I wrote to the right hon. Member for Heywood and Royton (Mr. Barnett), the Chairman of the Committee, and I wish to read two paragraphs from that letter so that they may be put on the record:The Directors of Shenley Trust Services are very surprised that criticism has been made of Shenley when the PAC has neither asked Shenley or the Underwater Training Centre Ltd. to give evidence to you nor have you directed any questions to Shenley or even requested a written submission. The Directors see that there are a number of major errors in your report and we ask the PAC to consider a detailed submission that will be made to you after extensive study of your report and after we have ensured that the financial information that we provide has been checked by the auditors of the company.1463You will realise that certain of your criticisms might be considered extremely damaging. Therefore, the Directors would ask, and I am certain have every reason to expect, that your Committee will take every possible step to correct this damage as soon as is possible after you have been provided with the facts.I have received a reply from the Chairman. I have not asked his permission to quote from it, but I am certain that he would have no reason why I should not do so. He thanked me for my letter and said that thePAC will consider whether to take further evidence on the Underwater Training Centre, when we receive the submission, which the Directors of Shenley Trust Services are preparing.There are a number of matters which I do not think should be debated on the Floor of the House at this time. Here I agree with the hon. Member for Fife, Central (Mr. Hamilton). However, there is one specific point which has been referred to, and that is the degree of profitability. I wish that my company was so successful as to be able to make a 70 per cent. profit. The exact profitability, and the figure that will be provided to the PAC, is 6⅔ per cent., which is very different from the 70 per cent. alleged. It is very important that that should be registered now, and that in time it is examined by the PAC.
§ Mr. Douglas
This is a very important matter, and the House should be clear on what we are talking about. Is the hon. Gentleman directly contradicting paragraph 35 of the twelfth report of the PAC, which says:We also consider that the contractual arrangements for running the Centre had unsatisfactory features. The contract with Shenley, a 'cost plus' arrangement, was not the result of formal tendering procedures, but of MSC's consideration of informal proposals from three organisations. This contract allowed Shenley a margin of 70 per cent. over their attributable costs. This appears to us to be an extremely high rate of profit. We recommend that standard tendering procedures should normally be followed as closely as possible and that where competition is not fully effective, steps should be taken to ensure that the profit margin is restricted to a reasonable level"?
§ Mr. William Hamilton
On a point of order, Mr. Deputy Speaker. Is it proper for the hon. Gentleman to cast aspersions on a Select Committee of this House? The PAC, of which I am a member, took evidence in good faith. For an hon. Member by inference to charge it with dishonesty is an impertinence.
§ Mr. Deputy Speaker
I do not think that the hon. Gentleman has cast any reflection on the Committee. He is merely contradicting something in the report. That is perfectly in order.
§ Mr. Hamilton
Yes, Mr. Deputy Speaker. I do not think that the hon. Gentleman will dispute that he said that the PAC had done a "Rooker". You, Mr. Deputy Speaker, will recollect what the inference must be. It is very objectionable, and I as a member of the PAC object to it very much.
§ Mr. Deputy Speaker
Order. I am already replying to a point of order. The hon. Member for Honiton (Mr. Emery) is entitled to tell the House, if he so wishes, that no information was asked of him or his company. That is the point which he has made. I think that he is suggesting that the other side of the story should have been told. I do not think he is making any other suggestion, or casting any reflection on the Committee.
§ Mr. Douglas
Further to that point of order, Mr. Deputy Speaker. I am sorry to detain the House. However, it should be clear that the PAC, in its observations, acts on factual evidence given by civil servants. We draw certain opinions. The paragraph which I quoted was related to factual evidence. The hon. Gentleman is quite entitled to contradict the factual evidence, but that remains a matter for the PAC and this House to review in the future.
§ Mr. Deputy Speaker
I have not heard the hon. Gentleman say anything that is a reflection on the Committee.
§ Mr. Emery
Thank you, Mr. Deputy Speaker.
There is another matter that is of considerable importance in relation to the regulations before the House tonight. I do not intend to deal with many of the other points of the Public Accounts Committee in regard to which only half a story has been put to the Committee. I give as one illustration the criticism that in diver training the underwater training centre did not keep in close touch with the industry. That is part of the criticism of the report.
No one has pointed out to the Public Accounts Committee that in an attempt to obtain the safety that the hon. Member for Kingston-upon-Hull, East wishes there is an advisory board to the centre of 16 members, all appointed directly from the industry, by the industry itself, and by the Government and the Health and Safety Executive in order to keep in touch, so that there can be a direct input into the centre. That point has never been made clear to the Public Accounts Committee. The lack of that information has allowed the Public Accounts Committee to come to certain conclusions. Had the Committee requested all the information, it would, I believe, have come to different conclusions.
It is suggested in the report that the centre had to be financed by public money. The suggestion put to the Government was that the whole of the centre should be financed by private capital. That has never been pointed out; it has never been mentioned. Why has that not been suggested in the report of the Public Accounts Committee?
I think I have said enough to show that there is a great deal of evidence that has never reached the Public Accounts Committee. It is therefore not very surprising that I take considerable exception to the fact that criticism linked with my name should have been made when, as a matter of natural justice, that criticism was never put to me before it was published. There has been the most scandalous criticism of me in the press, and it is entirely unjustified.
I congratulate the Government on going forward with the licensing round, as they had already indicated was their intention. I believe that they are right in so doing. I only hope, however, that they will pay 1466 some attention to the major point of the hon. Member for Kingston-upon-Hull, East as to the need very quickly to get diving safety regulations on the statute book.
§ Mr. Dick Douglas (Dunfermline)
I shall be very brief concerning the regulations and return to the gravamen of the issue before us, which is related to the seventh round and the regulations amending the conditions of licensing.
I want to return to the role of the British National Oil Corporation and to put certain aspects of the Government's policy in relation to BNOC before the Minister. As I understand the position, the intention is not to privatise the downstream aspect of the BNOC but to try to inject some private aspect of capital in relation to the upstream, the exploration and the production side of the corporation.
I want to be clear about the method of financing the totality of BNOC's operations. At present, it is financed through the national oil account. If there are some alterations in the method of finance and if private citizens in one shape or another are asked for their contributions to the future development of BNOC, I want to know at what rate of interest these sums are to be forthcoming. Is it to be a rate of interest higher in any way than the Government would expect to get in terms of short-, medium- or long-term market considerations? If it is to be higher, it is a bad bargain for the company and for the country.
Therefore, we on the Labour Benches would resist very strongly any form of subvention to the private interests through the British National Oil Corporation's revenues when we would be paying as a nation a higher rate than we would expect in governmental terms. I think that we are entitled to some answers, because we must be clear about the Government's intentions.
Over and above that, there are important considerations in relation to international oil—
§ It being half-past Eleven o'clock, Mr. Deputy Speaker put the Question, pursuant to Standing Order No. 4 (Statutory Instruments, &c. (negative procedure)).
§ Question negatived.